Yet another reason for a higher inflation target: It's a lot easier to argue "I didn't get a benefit increase this year even though my personal expenses increased" than it is "Because inflation was 3%, I only got a 3% COLA this year, even though my personal cost-of-living increase was closer to 5%." The political temptation to give in to the former is far stronger, leading to a "ratchet" effect where above-inflation benefit increases in low-inflation years are not offset by below-average increases in higher inflation years.

I wouldn't necessarily eliminate all prescription drugs from Medicare, but I'd restrict them to non-patent, generic drugs.

The problem is that the appetite for health care is near infinite as we near the end of the mortal coil. And the cost for the last 1/2 year of life is something like 50% of the total (working from memory, so please forgive any error...)

As technology marches on, we can afford more care for more people because the cost per unit decreases, so we need some sort of system that recognizes this fact. Also, fiscal situations fluctuate, so we need some sort of system that recognizes this fact as well. For prescription drugs, generics are a good proxy for this.

If we have X dollars to allocate, and medical technologies are at level Y, we should be able to calibrate the appropriate level of affordable care at any given time, with additional care purchasable from the private market.

Yes, this is "rationing", but what of it? We currently ration by a far more Darwinian mechanism, and indeed the very nature of politics is "rationing" scarce resources towards some societal end (cue: Stephen Morris and preference aggregation).

The government is here to "promote the general welfare", not to provide everything for everyone, or everything for some folks and nothing for others. We need a basic system that compensates for the fiscal and technological environment, universally for all citizens.

"It seems quite plausible that that the CPI-W underestimates inflation for older Americans; it would be nice to see clear evidence to this effect."

Indeed, it seems quite plausible that the CPI underestimates inflation for *all* Americans.

"During the first Bush Republican Administration, Chief economist Michael Boskin and Federal Reserve chair Alan Greenspan lobbied for a change in this methodology. They believed that when consumers could no longer afford a particular item, they would purchase a cheaper substitute. If steak, for example, became unaffordable, the consumer would switch to hamburger. If cars with V8 engines became too expensive, the consumer could purchase a car with a smaller engine. And so on.

The CPI, they argued, should reflect actual purchase decisions, rather than a fixed basket of goods that would gradually become irrelevant as consumers continued to substitute cheaper products for those on a fixed list of goods. In effect, they wanted the BLS to find ways to decrease the reported rate of inflation by tracking consumer buying habits as they struggled to find cheaper goods and services."

I just turned 62 I qualify for my first Social Security payment this month, I worked as an auto mechanic for 37 years. I payed $121,000 of my money into the social security system. I will be receiving $1449 a month. I hope I can at least break even on the payout.
That should take about 7 years, even if you don't compute any interest over the 37 year period. I guess that is the most I can hope for in this day and age. Maybe!
PS: my taxable income last year was only $300. Old auto mechanics with arthritis aren't very hire able.

Per the CPBB, using census data, about 13 million elderly are lifted above the poverty line by social security and some 2 million children. Remember, that children receive benefits through disability or because they're being raised by an older person, etc.

There is a real problem with extending eligibility to age 70, but that is also unnecessary if there is any meaningful means testing. The funding issues with respect to social security aren't nearly as large as the public imagines. The much bigger problem cost-wise is Medicare because without reform - which the GOP wants to repeal because, in part, it cuts Medicare by $500B over 10 years - then we have a massive problem. Medicare is an area where politics plays a slightly different role. Politicians can't offer new Social Security benefits but we saw that happen with Medicare D, which added some $5.6 Trillion in unfunded liabilities to the future of this country. That was passed by the party of fiscal responsibility which now complains about the deficits and the costs imposed on the future.

*Take a minute and look up what CPBB is and you'll see they aren't a fly by night website.

As an old guy, soon to be so over the hill as measured by that magic age of 70 (where the heck did that come from)being bandied about on this forum, I believe that means testing wouldn't be a bad approach. I sure like getting my SS payment each month (so did Ronald Reagan). But I would do ok if it were reduced a bit, or if more was taken out to support Medicare.

I would like to see those elderly who really need support, the 1/3 or so, of SS beneficiaries who depend on SS for most of their income, get some help. Tough to live on $1,000, or even $1,400 a month with SSI, even if you're old, especially if you have a chronic condition or three to manage.

And you youngsters shouldn't forget that we too paid into the system to support our grandparents and our parents. You may be surprised to know we even thought about that and we understood how the system worked, and we (at least most of us) were happy to pay it. Sure there were more of us to spread the tax, but we still paid when we were young and low paid and trying to support our families through other recessions and other economic disasters.

Yeah, on the average older folks control a lot of wealth. We've had a long time to work on that and the great good fortune to be born at the right time. But remember the definition of average, and think about the large population of much less than wealthy elderly. So props to bampbs.

I'm with Heimdall on agreeing with doublehelix . . . including the exploding head. ;-)

Having decided that we have to adjust the eligibility age upwards (70 immediately is a start, but is it sufficient?) and means-test the benefits, can we move on to the next piece of the puzzle: Medicare/Medicaid (leaving defense for a different fight). After dropping Medicare Part D (free drugs), what else can we do to restrain the run-away costs? Limit the number of procedures that are covered, starting with what are misleadingly called "extraordinary measures" to keep someone alive when there is little prospect of recovery? Other ideas?

I'm puzzled at why our society thinks poverty in old age is so awful, but child poverty has far less traction. No third rail status for CHIP or free school lunches or free immunizations. But hey no COLA for SSI, no Medicare coverage for restless legs (sorry, I know it's a real condition, but to me the name seems so funny it ought to symbolize extravagant public health care spending), and all of a sudden the bonus army is on the march again.

"In the annual Trustees Report, projections are made under three alternative sets of economic and demographic assumptions. Under one of these sets (labeled "Low Cost") the trust funds remain solvent for the next 75 years."

Don't let the boogiemen scare you.
They just want a stealth tax hike to pay for the tax cuts.

Do taxpayers get to inflation-index their income to prevent bracket creep on their income taxes? How about capital gains? No? Senior citizens have it pretty sweet as a group in our country.
The fundamental problem with our welfare state is that there are too many old people getting too many benefits. I state this against my own self-interest as I'm well on my way to getting there myself. We can either reduce the number of old people by reclassifying 'old' as age 70 or above, or we can means-test Social Security benefits, or do both, but we cannot as a country keep going down this path to insolvency as no amount of rational taxation will be enough.

'I am proud to be paying taxes in the United States. The only thing is I could be just as proud for half of the money.'
- Arthur Godfrey

Unfortunately, I don't think we could sensibly use a basket of goods more applicable to seniors for a purpose like this. If we increased benefits for seniors on the basis that inflation is higher for seniors, spending by seniors would likely increase further to consume the extra income. That would drive further inflation in the "seniors" basket. It's self-reinforcing. No, the ratio of social security benefits to average consumer spending needs to remain fixed.

I have the same complaint with the attempts to minimize growing income inequality by claiming that inflation has hit the rich harder; it's rather clearly determined that a group which receives an income increase will spend more. Inflation adjustments make sense when applied to geographical regions, since to some extent these are not the same markets. It seems confusing to apply this logic to disparate groups who share the same market, even if they do tend to buy different things within that market for whatever reason.

What an article! No rise in Social Security payments, prices haven't risen (according to some a-hole somewhere), prices have risen (according to a guy who has to use most of his income to buy food and pay his bills), perhaps that dude has a point, maybe not, but let's not forget that seniors have all the money so don't worry about it.

Let's try this again: staples are more expensive, Social Security is meant to provide a basic income regardless of your wealth and payments haven't risen to account for the rise in costs, Social Security in no way drives inflation or is a burden to the budget, and wealth distribution is such that many seniors may have a ton of money, there are legions beneath them just trying to get by.

Oh yeah, Bambps makes a decent suggestion, but it's still best to overspend rather then underspend on this.

"Social Security is supposed to be a social-insurance programme. The idea is to pool resources to insure against the risk of poverty in old age."

That's arguably what it should be.

The problem is that in both perception and practice, it's kind of that while at the same time it's also kind of a compulsory pension where individuals pay in and (at least per the paper statements we get in the mail) gradually build up a retirement fund which is then paid back to us once we're old enough.

Clearing this up one way or the other would arguably be very useful but, of course, as with most such hard decisions it would also disappoint people who've grown fond of what has been kind of promised under the fudged, "everything to everyone" version.

As someone currently paying the contributions that are funding the benefits that seniors are receiving I'm left feeling that the inflation that I'm experiencing is just as important a measure for what their benefits should be as the inflation they're experiencing. Remember, it's not the government paying the bill, it's the grandkids.

I also have to add I don't like means testing. While the economics behind it is good, I think our tendency to means test everything results in a cultural tendency to view all these programs as class warfare. We'd be better off to take how people perceive these things into account and just cap benefit payments. Perhaps have the progressive indexing only apply to benefit payments after a certain level rather than have different calculations by income level to start with. Perception gets in the way of good economics all the time, I think this is another case of that.